This year marks 25 years since the creation of Ortec Finance’s decision-based attribution model, a framework that has become a cornerstone for asset owners managing multi-asset portfolios.
First developed in 2000 alongside a major Dutch pension scheme, the model was designed to overcome the limitations of existing attribution tools, providing investors with a method better aligned to the realities of fund management.
Ortec recently delved into the value of value-attribution for asset owners managing multi-asset portfolios.
At the time of its creation, the model addressed a growing challenge: the rising complexity of multi-asset portfolios and the demand for more meaningful insights into how investment decisions impact overall performance. Over the years, it has gained international recognition, with institutional investors widely adopting it as a leading approach to total fund attribution.
The Brinson attribution framework, introduced decades earlier, laid the groundwork for performance attribution by distinguishing between allocation and selection effects. While highly influential, it relies on a bottom-up approach that often fails to reflect how real-world investment decisions are structured.
Decision-based attribution, by contrast, begins at the top of the investment management hierarchy, following the flow of decisions through the portfolio structure. Each stage of the process becomes its own benchmark, with value measured by comparing outcomes across layers. This means that every investment decision is accurately captured and contributes to the overall profit or loss, ensuring results reflect the reality of how funds are managed.
The model’s design enables asset owners to better evaluate the added value of active decisions across all asset classes and styles. It also tackles recurring pain points for performance teams, such as handling illiquid investments, addressing benchmark inconsistencies, managing pooled structures, and applying attribution to complex strategies like hedge funds, leveraged products, or currency overlays.
A quarter of a century on, the investment landscape has evolved significantly, with more dynamic allocation, new asset categories, and the widespread use of derivatives. Asset owners now often combine internal and external management, further increasing complexity. The decision-based attribution model remains highly relevant by offering a framework that adapts to these realities.
Ortec Finance has embedded this approach into PEARL, its performance measurement and attribution platform. PEARL allows asset owners to mirror their unique decision hierarchies in configurable fund structures, integrating decision-based attribution with advanced tools like currency overlay attribution and flexible benchmark modelling. This combination ensures that investors can continue to measure, evaluate, and refine their strategies with precision.
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